Urban estate

With the volume of transactions greatly curtailed by the economic environment, we took the opportunity to further develop our strategy, particularly regarding asset allocations. We aim to gradually dispose of peripheral and non-core assets in central London, reducing this sector's current weighting down from a high point of 80% to a figure closer to 60%. St James's and Regent Street remain the heartland for investment and both will benefit from a high level of proactive management in the future.

In the case of St James's, we have developed a programme that will see significant change in what is an important area of London; one that will complement Regent Street rather than compete with it. Where Regent Street's attraction to tenants is centred on footfall, the future for St James's is as a destination in its own right. We aim to retain the mixed-use occupancy that characterises the area at the moment, while at the same time developing the buildings and improving the public realm. Towards the end of the financial year we submitted plans for a 10,000m² office-led scheme at 210–214 Piccadilly.

We also evaluated our benchmarking process during the year. Although the IPD Quarterly Index has served us well, we have now established bespoke benchmarks for most of the portfolio which better reflect our holdings and should enable us to monitor our progress more accurately. We will measure performance against these new benchmarks next year, and publish the findings in the annual report.

“Our relative success is due to the quality of our portfolio and our continued focus on long-term opportunities.”

The year saw us gain full planning consent for the Quadrant development, a major achievement for the urban estate team. Work has now commenced on Quadrant 3 (the former Regent Palace Hotel) an office, retail and residential development being carried out directly by The Crown Estate. The development of Quadrant 1 (the former Café Royal) as a five-star hotel is also underway with Alrov Group developing under a building agreement. Both projects are due for completion in early 2012.

The Quadrant is part of a £750 million Regent Street investment programme that will totally revitalise the southern Regent Street environment. It is the most ambitious scheme ever undertaken on Regent Street; one which will represent the most significant improvement to the quality of London's public realm, after Trafalgar Square, in the last 30 years. The Quadrant is a mixed use regeneration scheme of the Regent Palace Hotel, Café Royal and Quadrant Arcade blocks. It will create a new 93,000m² built area in the heart of the West End, together with a 4,100m² public space, and secure Regent Street's reputation as a world-class location.

In line with our strategy, we made a number of minor purchases to build the Regent Street portfolio and enable future development to take place. We also granted long leases on properties at Palace Green in Kensington, and at 9–10 Haymarket.

Regent Street's reputation received a number of endorsements through the year, as major retailers continued to recognise it as the natural London home for international brands and flagship stores. For example, Ferrari, National Geographic, LK Bennett, Tous and Furla all opened flagship stores on the Street during 2008/09. And from late 2009 Anthropologie will offer its signature mix of women's fashion and home décor from its new home at 158 Regent Street.

We were able to take advantage of asset re-pricing and the availability of stock that is not usually possible to acquire. Among these were strategic purchases of two large, dominant A1 retail parks.

The Bath Road Retail Park in Slough, which was acquired for £92 million from SEGRO plc, provides over 18,000m² of prime space which is currently let to national retail chains including Next, Argos and Mothercare.

In Leeds, we purchased a 50% share of the Crown Point Shopping Park from Morley, Aviva's UK-based asset management business, for £67.7 million. On the edge of Leeds city centre, Crown Point is an open-consented shopping park with a broad range of quality high street brands. Both acquisitions reinforce our strategy to diversify our portfolio outside London.

We also purchased six multi-let industrial estates from SEGRO plc, for £64.4 million. Three properties are located in Greater London while the others are in Basildon, Oxford and Swindon. The estates are fully let to good quality tenants including Kerry Foods, Costco and Carlsberg and we anticipate attractive initial returns as well as rental growth prospects.

In Worcester, we began a comprehensive refurbishment project which will enhance our CrownGate Shopping Centre. This is part of a long-term £5 million improvement plan intended to support the businesses of our retail tenants in Worcester and explore the potential for further developing the scheme.

We take sustainability seriously and are committed to supporting our people, customers and the environment as well as the wider community.

During the year we continued to develop our tri-generation programme which will eventually service many of our properties in the Quadrant development. This project, which is the first of its kind in London, will be fuelled in part by hydrogen. We are also working on firstly identifying and secondly reducing our carbon footprint and water consumption across the urban estate. We monitored a number of buildings within the portfolio and have assessed that total like-for-like carbon emissions decreased by 0.1% during the year. This will be an important area of focus for 2009/10. Like-for-like water consumption decreased by 8% and we will work to ensure that this downward trend is maintained.

The Regent Street lights were again at the heart of the London Christmas shopping experience and were this year switched on by pop band McFly. For the future, we intend to balance the environmental impact of the lights by planting native woodland on our Glenlivet Estate.

As part of our Biodiversity Action Plan, we are carrying out studies into the feasibility of keeping honey bees on the rooftops of two buildings in Regent Street and also into the possible installation of a ‘green roof' on the CrownGate Shopping Centre in Worcester. A specialist will help to create an ideal habitat on the Regent Street roofs, including appropriate flowers and plants as well as a small pond. Bees are an important part of ecosystems as they are key pollinators and an important food source for birds.

As part of the feasibility study for the green roof at Worcester, The Crown Estate is looking into the types of flora and fauna that would be conducive to endangered species in the area, including the kestrels that reside near the shopping centre. In addition to contributing to conservation in an urban environment, the green roof has the potential to reduce the energy needs of the centre by providing insulation and helping it to adapt to climate change impacts such as heavy rain by slowing surface water run-off rates.